Definition: Factor Price Distortions

Factor Price Distortions - "situations in which factors of production are paid prices that do not reflect their competitive market price because of institutions, state interference, or monopolistic or oligopolistic restraints on market supply and demand. Distortions in LDCs typically include unsuitable technology, subsidized capital and foreign exchange costs, and labor paid more than its market price because of labor unions or political pressure." - source: Economic Development 4th Edition by E. Wayne Nafziger